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___________________________________________ID:________________________________________ ______ Instructions: Clearly identify your name and ID in...

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Name:___________________________________________ID:________________________________________ ______ Instructions: Clearly identify your name and ID in both, the question sheet and exam book, and submit both. Show your answers only in the exam book . Any writing in the question sheet will not be read for grading. Answer All. Each question is equally weighted of 10 marks. 60 minutes in length Questions: 1. Suppose a firm in Toronto has two markets with the following demand curve for each market, P 1 =100 − Q and P 2 =\$60, and the marginal cost of this firm is MC=2Q. Discuss the best pricing policy for this firm to maximize its profit. 2. Suppose the market demand for a particular product is given: P= 10 - 0.002Q, and the industry marginal cost is MC=4+0.001Q. Compare the welfares between the market structures of perfect competition and monopoly. 3. The production function is f ( L , M ) = 4 , where L is the number of units of labor and M is the number of machines. If the amounts of both factors can be varied and if the cost of labor is \$36 per unit and the cost of using machines is \$4 per machine, then a. Compute the total cost of producing 24 units of output. b. Compute the amount of output if cost constraint is limited \$432.00 4. Suppose the cost function for a perfectly competitive firm is given that: TC = 100 + q 2 . Market demand is Q = 10,000 - 100p. a. What could be the profit when the industry is in a long-run equilibrium position? b. How many identical firms will there be in the long-run position? c. Derive the long-run industry supply curve. 5. A monopolist faces the following demand curve: Y=50-0.5P, has the cost function that C=100+4Y, where Y is the quantity of the product, and the price elasticity of demand is currently -3. a. Compute the profit maximum level of price and quantity. b. Compute the size of markup. ECON Page 1 of 1

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